Energy Market Review, Tuesday 28th August
Headlines for Tuesday, 28th August
- The majority of gas and power contracts rose last week, with contracts hitting fresh highs as bullish market fundamentals, including 10-year high carbon prices, and rising coal and oil prices, continued to give support.
- EU ETS carbon prices increased 8.0% to average €19.5/t last week. Prices hit a fresh 10-year high of €20.7/t on 23 August, finding support from strong prices across the energy complex and higher demand for fossil fuel generation amid continued nuclear outages in France.
- Day-ahead gas prices hit a fresh five-month high of 66.5p/th, up 4.7% as further strikes in the North Sea, and a reduction in flows from Norway, left the gas system undersupplied throughout the week. Seasonal gas contracts gained 2.2% on average, with winter 18 gas increased 3.3% to 71.6p/th.
- Day-ahead power prices rose 3.2% to end the week up at a fresh five-month high of £65.3/MWh, as low wind output is forecast throughout next week. Seasonal power contracts went up 2.7% on average, with winter 18 power up 3.8% to £68.8/MWh.
- Nearly all seasonal gas and power contracts increased, hitting fresh highs last week.
- Brent crude oil prices reversed the previous week’s losses, up 2.0% on average to $73.5/bl. Prices rose throughout the week in response to the upcoming Iranian sanctions, and news that US crude stockpiles decreased the previous week.
- API 2 coal rose 1.1% to average $89.4/t last week.
Brent Crude Oil
The weekly average Brent crude oil price rose for the first time in five weeks, gaining 2.0% to average $73.5/bl, up from $72.1/bl the previous week. Prices started the week at $72.1/bl, rising throughout the week in response to the upcoming Iranian sanctions, and news that US crude stockpiles decreased the previous week. The worsening US-China trade war capped gains mid-week, but supply concerns continued to outweigh trade tensions as prices rose above $75.0/bl towards the end of the week.
API 2 Coal
API 2 coal rose 1.1% to average $89.4/t last week. Moderate temperatures and above seasonal normal levels of rainfall are expected in China in the coming week and could lead to reduced coal demand as the recent heatwave ends.
EU ETS Carbon
EU ETS carbon prices rose for the ninth consecutive week, increasing 8.0% to average €19.5/t, up from €18.1/t the previous week. Prices rose throughout the week to a fresh 10-year high on 23 August at €20.7/t. Carbon prices have been influenced by strong prices across the energy complex and higher demand for fossil fuel generation on the continent amid continued nuclear outages in France. Increased interest in stricter climate targets following comments from the European Commission suggesting the bloc could increase its overall climate goal to a 45% reduction on 1990 levels by 2030, has also supported prices.
All near-term gas contracts increased last week.
Day-ahead gas gained 4.7% to 66.5p/th from the previous week. Gas prices rose to 65.0p/th on 21 August following a 24-hour strike at three of Total’s North Sea oil and gas terminals. The gas system was undersupplied throughout the week, supported by reduced flows from Norway, leading to prices hitting a fresh five-month high at the end of the week.
Both September and October 18 gas prices ended the week on fresh record highs. September and October 18 gas rose 3.4% and 3.6% week-on-week to 66.0p/th and 66.1p/th respectively.
All seasonal gas contracts rose week-on-week, up 2.2% on average. All contracts hit fresh highs last week, driven by power fundamentals as EU ETS carbon and API 2 coal prices continued to rise. Winter 18 and summer 19 gas were up 3.3% and 2.9% to 71.6p/th and 56.2p/th respectively.
Annual October 18
Annual October 18 rose 3.1% week-on-week to 63.9p/th, a fresh high since our records began in September 2015. The contract is 10.9% above its price the same time last month (57.6p/th), and 43.8% above its price the same time last year (44.4p/th).
All near-term baseload power contracts continued to experience upwards momentum last week.
Day-ahead power rose 3.2% week-on-week to £65.3/MWh, a fresh five-month high. Prices were supported throughout the week by rising commodity and gas prices and were offered little respite as total renewables generation fell.
Both September 18 and October 18 power rose throughout the week and reached record highs on Friday. September 18 power gained 3.8% to £64.9/MWh and October 18 power gained 4.4% to £65.8/MWh.
Week-on-week, seasonal contracts were up 2.7% on average. All seasonal baseload power contracts hit fresh highs last week, the highest since on our records for the contracts began in 2015. On 24 August, winter 18 power peaked at £68.8/MWh and summer 19 rose to £56.5/MWh.
Winter 20 power was the only contract not to rise week-on-week, ending the week unchanged at £58.0/MWh.
Annual October 18
The annual October 18 power contract gained 4.1% to £62.7/MWh (up from £60.2/MWh), a record high.
The contract is £6.1/MWh (10.7%) higher than the same period last month, and 43.2% above last year when it was £43.8/MWh.